Inditex, the Spanish retail giant behind Zara, posted disappointing first-quarter results this week as revenue and net income came in below analyst expectations and early summer sales trailed last year’s pace. The earnings miss, coupled with tariff-related uncertainty in key markets like the U.S., sent shares tumbling 4.4% in Wednesday trading on the Madrid Stock Exchange.
The company’s results highlight a shift in momentum after several strong quarters, with investors now questioning whether Inditex can maintain its premium valuation amid rising macroeconomic headwinds and intensifying global competition from low-cost challengers.
Revenue: €8.27 billion (+1.5% YoY) vs. €8.39 billion expected
Net income: €1.3 billion (+0.8%) vs. €1.32 billion expected
EBIT: €1.64 billion (+0.3%)
EBITDA: €2.39 billion (+1.0%)
Gross margin: 60.6% (flat YoY, -4bps)
Inventory: €3.79 billion (+6%)
Net cash position: €10.78 billion (vs. €11.62 billion in Q1 2024)
EPS: €0.419 per share
Store count: 5,562 stores (down from 5,698 last year)
Summer sales (May 1–June 9): +6% YoY (vs. +12% in 2024)
The company highlighted continued strong reception to its Spring/Summer collections and a 6% increase in constant-currency sales during the early part of Q2. However, that pace fell significantly short of last year’s 12% growth over the same period, indicating consumer caution may be deepening.
Sales in Q1 rose 1.5% to €8.27 billion, but the growth was modest by Inditex standards. On a constant currency basis, sales grew 4.2%, rising to 5.3% after adjusting for the leap year. Analysts, however, had expected stronger performance, especially given Inditex’s significant investments in product, store refurbishments, and logistics over the past year.
Net income grew just 0.8% to €1.3 billion — a figure slightly below consensus estimates. While gross margin remained robust at 60.6%, operating leverage showed signs of pressure. EBIT rose only 0.3%, and EBITDA margin slipped slightly to 28.9%, down from 29.1% in Q1 2024.
“The current environment is difficult to predict,” said Gorka García-Tapia Yturriaga, Inditex’s head of investor relations. “We are monitoring the situation closely, especially in relation to U.S. tariffs and overall consumer sentiment.”
Inditex had flagged potential demand weakness as early as March, linking it to rising concerns around U.S. trade tariffs, especially on apparel and footwear. With the U.S. being Inditex’s second-largest market after Spain, any shift in cross-border costs has a meaningful impact on purchasing behavior.
Though Inditex operates a diversified sourcing model — manufacturing across Asia, the Mediterranean basin, and Latin America — it remains exposed to shifting trade policy and logistics costs in major markets. Management emphasized that its flexible supply chain is well-positioned to absorb volatility, but near-term uncertainty persists.
Inventories rose 6% to €3.79 billion — a red flag for some investors, especially given the softer pace of early Q2 sales. Inditex defended the buildup, calling the collections “high quality” and in line with seasonal demand, but it does reflect cautious forward buying in an unpredictable market.
Meanwhile, the company’s net cash position declined to €10.78 billion, down from €11.62 billion a year ago, reflecting higher capital investments. Inditex is pressing ahead with a €1.8 billion ordinary capex plan for FY2025 and an additional €900 million dedicated to logistics expansion — part of a two-year infrastructure program launched last year.
The new Zaragoza II distribution center is scheduled to go live this summer, expected to support faster fulfillment and better integration between online and physical retail.
Market reaction to the earnings miss was swift. Inditex shares closed 4.4% lower on Wednesday, with the stock now down over 12% from its December 2024 peak. Analysts say the muted results are likely to fuel more scrutiny of the company’s valuation and long-term growth trajectory.
While Inditex reaffirmed its full-year outlook — projecting a stable gross margin within ±50 basis points and continued space expansion — investor confidence may take longer to recover, especially if the macro environment remains uncertain.
Even with one of the industry’s strongest brand portfolios and operational models, Inditex’s Q1 suggests that global headwinds are starting to pinch. Slower sales, rising inventories, and muted earnings growth could make 2025 one of the company’s most challenging years since the pandemic recovery.
Check out the full earnings report here - Inditex Q1 2025 Report